Business Studies Multiple Choice Question – 4 August 2017

Rob owns a computer repair business. He has a small mortgage on his workshop, £3,000 fixed interest loan, and a small overdraft of £800. Most of his customers are people who have computers that are a few years old.

What TWO of the following are MOST LIKELY to be the effect on Rob’s businesses if interest rates decrease?

Select TWO answers:

The amount of interest paid on the loan will fall

The mortgage payment will increase

The amount of interest paid on the overdraft will fall

The business will cease to trade

Some customers may now choose to buy new computers and may not use Rob’s services

The amount of interest paid on the loan will rise

The interest rate set by the Bank of England is known as the?
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Business Studies KS4 classes.

The answer is 3 & 5 – The mortgage payment will likely fall as many mortgages are on variable rate leading, the loan interest will not change as it is fixed, but the overdraft payment is likely to fall as it too is on a b=variable rate. Rob’s customers usually have their computers repaired which are old. If interest rates go down, some may be tempted to buy new computers instead of having them repaired by Rob, as the interest cost on the moneys they might borrow to buy a new computer are lower.